Gold World News Flash |
- Broken Dollar
- Gold Spikes as the Fed Provides Target for Dollar Destruction
- Gold Seeker Closing Report: Gold and Silver End With Decent Gains
- Gold on Track for Best Month Since August 2011
- Central bank policy is obscuring market values, Warsh tells Stanford audience
- Harvey Organ's Daily Gold & Silver Report
- Gold Bonds: Averting Financial Armageddon
- If The Economy Is Improving…
- IceCap Asset Management: No Country For Old Men
- In The News Today
- Guest Post: Gold Bonds: Averting Financial Armageddon
- Bizarre Silver Open Interest
- HUI higher but showing signs of selling pressure coming back in
- Republicans Demand Block Of US IMF Funding To Bail Out Europe
- Government-Guaranteed Losses
- Gold Projections 1/26/12
- The Surprise Rally In Gold and Silver
- Why Endeavour Silver Corp. Is Now Withholding Gold & Silver Inventory From The Market 1/2
- Has Bernanke Become A Gold Bug's Best Friend?
- The Gold Price Broke out Above it's Downtrend and Traded Above the 200, 150, 50, and 20 Day Moving Averages
- Will Iran Kill the Petrodollar?
- How Ben Bernanke Rationalizes “Exceptionally Low” Interest Rates
- Leeb - Fed Game Changer Sparks 2nd Leg of Gold & Silver Bulls
- Eric Sprott: Mania. Manipulation. Meltdown.
- Financials Have Worst Day Of Year As Fed Is Faded
- Silver Is The Indispensable Metal
- Why Silver Miners are Hoarding Silver
- Presenting The Interactive "Wiggle-Room Index" Or Which Countries Will Be Forced To Bail Out The Developed World
- Gold Daily and Silver Weekly Charts - Consolidation (With a Slight Return)
- Tail Events, Isolation, New Normal
| Posted: 26 Jan 2012 05:36 PM PST Gold Scents
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| Gold Spikes as the Fed Provides Target for Dollar Destruction Posted: 26 Jan 2012 04:22 PM PST  Today Michael Pento told King World News that QE3 has officially commenced. Pento, who founded Pento Portfolio Strategies, said the Fed is determined to continue its war against the middle class and savers by ramping up inflation. Pento had this to say about the situation: "The Fed has indicated that quantitative easing part three has commenced. As a part of the Fed's own version of glasnost, Bernanke has sought to lift the veil on the sausage making behind the decisions reached by the FOMC. To that end, our central bank has disclosed they now have an inflation goal of at least two percent. Therefore, the plain and sad truth is that the Bernanke Fed has now provided the holders of U.S. dollars a target rate for its destruction."
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| Gold Seeker Closing Report: Gold and Silver End With Decent Gains Posted: 26 Jan 2012 04:00 PM PST Gold climbed to as high as $1730.26 by about 10AM EST before it fell back off a bit into the close, but it still ended with a gain of 0.53%. Silver rose to $33.784 before it also dropped in late trade, but it still ended with a gain of 0.33%.
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| Gold on Track for Best Month Since August 2011 Posted: 26 Jan 2012 02:15 PM PST courtesy of DailyFX.com January 26, 2012 03:54 PM Daily Bars Prepared by Jamie Saettele, CMT Gold extended its gains and is up nearly 10% for the month. The performance in January puts gold on track for its best month since August (12.25%). Of course, the metal plunged in September. Further, one has to go back to November 2009 to find the next best month (13.21%). Guess what? Gold plunged in December 2009. Yesterday’s comments apply – “While today’s incredible rally may be exhaustive, attempting to short is not smart as studies show that trends tend to persist until month end.” Supports are now1700 and 1680. The next potential resistance is from a steep trendline at 1747. Bottom Line – flat...
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| Central bank policy is obscuring market values, Warsh tells Stanford audience Posted: 26 Jan 2012 01:53 PM PST 10:04p ET Thursday, January 26, 2012 Dear Friend of GATA and Gold: Central banks are now so heavily influencing asset prices that investors are unable to ascertain market values, former Federal Reserve Board of Governors member Kevin M. Warsh told the Stanford University Institute for Economic Policy Research tonight. This influence is especially evident, Warsh said, with the Fed's purchase of government bonds, which has made it impossible for investors to use bond prices to learn anything about markets. Warsh, who disclosed during GATA's freedom-of-information litigation with the Fed in 2009 that the central bank has secret gold swap arrangements with foreign banks (http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf), added that the Fed is trying to do too much and the rest of the government not enough to encourage economic growth. While he said nothing explicitly about gold, Warsh seemed to come pretty close to your secretary/treasurer's observation almost four years ago that there are no markets anymore, just central bank interventions. (See http://www.gata.org/node/6241.) ... Dispatch continues below ... ADVERTISEMENT Sona Discovers Potential High-Grade Gold Mineralization From a Company Press Release VANCOUVER, British Columbia -- With its latest surface diamond drilling program at its 100-percent-owned, formerly producing Blackdome gold mine in southern British Columbia, Sona Resources Corp. has discovered a potentially high-grade gold-mineralized area, with one hole intersecting 13.6 grams of gold in 1.5 meters of core drilling. "We intersected a promising new mineralized zone, and we feel optimistic about the assay results," says Sona's president and CEO, John P. Thompson. "We have undertaken an aggressive exploration program that has tested a number of target zones. Our discovery of this new gold-bearing structure is significant, and it represents a positive development for the company." Sona aims to bring its permitted Blackdome mill back into production over the next year and a half, at a rate of 200 tonnes per day, with feed from the formerly producing Blackdome mine and the nearby Elizabeth gold deposit property. A positive preliminary economic assessment by Micon International Ltd., based on a gold price of $950 per ounce over eight years, has estimated a cash cost of $208 per tonne milled, or $686 per gold ounce recovered. For the company's complete press release, please visit: http://www.sonaresources.com/_resources/news/SONA_NR18_2011-opt.pdf Warsh was especially critical of the federal government's efforts to stimulate the housing market. "The government-sponsored housing entities remain sources of vulnerability to the U.S. economy," he said, "and repeated ad-hoc attempts to push Fannie Mae and Freddie Mac to take greater risks at taxpayer expense are deeply counterproductive." Such efforts have not succeeded, he added. Warsh said higher real incomes are far more important to economic growth than recovery in the housing sector. He said he opposed pursuing economic recovery through inflating debt away and devaluing the currency. Warsh was the youngest person ever appointed to the Fed board, resigning eight months ago after five years in office, and is now a distinguished visiting fellow at the Hoover Institution at Stanford and a lecturer in the university's Graduate School of Business. He received his undergraduate degree at Stanford in 1992 and a law degree at Harvard three years later. He was special assistant for economic policy under President George W. Bush and executive secretary of the National Economic Council. He was also a member of the President's Working Group on Financial Markets, commonly known as the Plunge Protection Team. Warsh spoke tonight from an outline he provided to GATA and then answered questions from his audience, which included Stanford faculty and students. The outline is appended. Warsh's talk was broadcast live at the Internet site of the Stanford Institute for Economic Policy Research -- -- and video of it is expected to be posted there shortly. CHRIS POWELL, Secretary/Treasurer * * * Home Truths By Kevin M. Warsh Distinguished Visiting Fellow Lecturer, Graduate School of Business, Stanford University Excerpts from Remarks as Prepared For Delivery Thursday, January 26, 2012 EMBARGOED Until 5 p.m. ET Regarding the state of the global economy: -- Excessive spending and the assumption of new liabilities endanger the creditworthiness of key nations and undermine prospects for the global economy. The famed "paradox of thrift" -- used to justify still more aggressive policy -- is confronting the cold, dark comfort of a sovereign debt crisis. -- Economies falter and markets flail when risk-free rates turn out to be not so risk-free. -- Global economic conditions are weak, leaving the global economy far from a durable recovery. In spite of this, and substantial errors in the conduct of policy, the private sector in the U.S. is outperforming. Seven "home truths" regarding the conduct of U.S. economic policy: 1. Policy has favored stability over growth and achieved preciously little of each. 2. Good economic policy takes time to bear fruit. Bad policy does harm in a hurry. 3. Exceptionally accommodative monetary policy can provide important transitional support for an economy. But recent policy activism -- measures that go beyond a central bank's capacity or traditional remit -- threatens to forestall recovery and harms long-term growth. 4. Central bank transparency is good, but transparency that delineates future policy breeds market complacency. It threatens to undermine the wisdom of crowds and the essential interchange with financial markets. 5. The primary responsibility of financial market regulation is to markets, not to firms. 6. The government-sponsored housing entities remain sources of vulnerability to the U.S. economy, and repeated ad-hoc attempts to push Fannie Mae and Freddie Mac to take greater risks at taxpayer expense are deeply counterproductive. 7. In charting a better path for the economy, policymakers should remind themselves of two essential and oft-forgotten virtues: greater humility in the conduct of policy and stronger faith in the underlying resiliency of the U.S economy. Join GATA here: California Investment Conference http://cambridgehouse.com/conference-details/california-investment-confe... Support GATA by purchasing gold and silver commemorative coins: https://www.amsterdamgold.eu/gata/index.asp?BiD=12 Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Prophecy Coal (TSX: PCY) Wins Positive Feasibility Study Company Press Release VANCOUVER, British Columbia, Canada -- Prophecy Coal Corp. (TSX: PCY, OTCQX: PRPCF, Frankfurt: 1P2) has received a positive feasibility study for the company's 600-megawatt Chandgana Mine-Mouth Power Project in central Mongolia. The report was independently prepared by Ralf Thomsen, project manager at Steag, a German firm specializing in the planning, financing, construction, and operation of highly efficient thermal power plants for fossil fuels. The study covers technical specifications, deployment, and financial analysis of a 4x150-mw thermal power plant to be built adjacent to Prophecy's Chandgana Tal coal deposit, which contains 140 million tonnes of measured coal. Last year the power plant received a construction license and the coal deposit received a mining license. Engineering, procurement, and construction management selection and project financing discussion have begun and are expected to be concluded this year. Construction is planned to start in April 2013, with the first 150-mw unit being commissioned in October 2015 and subsequent units to start in April 2016, October 2016, and April 2017. With proper maintenance the project will have 30 years of commercial operation. For the complete statement from the company, including maps and charts, please visit: http://www.prophecycoal.com/news_2011_jan17_prophecy_receives_power_plan...
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| Harvey Organ's Daily Gold & Silver Report Posted: 26 Jan 2012 12:54 PM PST Portugal 10 yr bond at 15%/Private PSI deal in Greece a non starter/USA raises debt ceiling to 16.4 trillion
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| Gold Bonds: Averting Financial Armageddon Posted: 26 Jan 2012 12:25 PM PST by Keith Weiner, ZeroHedge:
I do not believe that my proposal herein is necessarily "realistic" (i.e. pragmatic). There are many interest groups that may oppose it for various reasons, based on their short-sighted desire to try to continue the status quo yet a while longer. Nevertheless, I feel that I must write and publish this paper. To say nothing in the face of the greatest financial calamity would go against everything I believe. *** It seems self-evident. The government can debase the currency and thereby be able to pay off its astronomical debt in cheaper dollars. But as I will explain below, things don't work that way. In order to use the debasement of paper currencies to repay the debt more easily, governments will need to issue and use the gold bond.(Wherever I refer to gold, I also mean silver. For the sake of brevity and readability I will only say gold in most cases.
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| If The Economy Is Improving… Posted: 26 Jan 2012 12:15 PM PST from The Economic Collapse Blog:
Read More @ TheEconomicCollapseBlog.com
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| IceCap Asset Management: No Country For Old Men Posted: 26 Jan 2012 12:13 PM PST From IceCap Asset Management January Investor Presentation Most Canadian pension funds are banking on 7% annual returns forever. Over the next few years, this unrealistic expectation will cost the respective governments and companies millions in shortfalls. In the USA, the California Public Employees Retirement System assumes it will earn over 7.75% annual returns. This false hope will result in over $6 billion a year in lower than expected investment income, that will also have to be paid by the financially challenged state (ie. taxpayers). Meanwhile, Thelma O'Keefe continues to quietly sock away 5% of her paycheck each and every week and has no idea what all the fuss will be about when she is eventually told her pension benefits will be slightly less than originally promised. Over 50 years ago, the average worker started to earn pension benefits and has been dreaming of working less, and golfing more, ever since. The Defined Benefit Pension Plan has been the rock of this dreamy foundation and is certainly a costly beast to say the least. Once the auditors, actuaries, custodians, lawyers, administrators, consultants, performance measurement guys, trustees and investment managers have been paid for their services, is there little wonder most of these retirement funds are running a little short. Yet, the primary reason most people fall asleep with even a slight mention of the words "pension funds" is due to the complexities and confusion resulting from this cumbersome investment scheme. However, after 3 quick espressos you'll see that the entire pension spectrum boils down to an educated guess as to how much money the pension plan will have to pay out to its retirees, and how much money its investments will pay in to the pension plan itself. This "pay-out-in" dynamic is a precarious balancing act to say the least. Should guesstimates for either one fall short, the difference will have to be made up by tax payers for government pension plans, and by profits for company pension plans. It is widely known by now that practically every government in the Western World is drowning in debt with no signs of growth anywhere on the horizon. Unfortunately, this looming pension funding problem could not have come at a worse time for these government supported pension funds. Meanwhile, most companies are certainly flush with cash and are infinitely better off than their public pension fund counterparts. However, even this enviable position will not help due to the expectations of great stock and bond market returns. Ever since the Western World pushed the debt envelope too far and proceeded to allow its governments to orchestrate one ill conceived bailout after another, investors of all shapes and sizes – including billion dollar pension funds and the little old ladies, have had to push their risk envelope too far and assume way too much risk in an effort to increase their investment returns. Full presenation:
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| Posted: 26 Jan 2012 10:52 AM PST Jim Sinclair's Commentary As usual, John Williams of ShadowStats.com tells us how it really is. - U.S. Hyperinflationary Great Depression Moves Ever Closer - U.S. Government and the Federal Reserve Effectively Have Destroyed Global Confidence in the U.S. Dollar - Systemic-Solvency and Economic Crises Have Not Abated - Precursors to Ultimate Dollar Continue reading In The News Today
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| Guest Post: Gold Bonds: Averting Financial Armageddon Posted: 26 Jan 2012 10:28 AM PST Written by and © by Keith Weiner Gold Bonds: Averting Financial Armageddon After the near-collapse of the financial system in 2008, a growing number of people have come to realize that our monetary disease is terminal. It is that group to whom I address this paper. I sincerely hope that this group includes leaders in business, finance, and government. I do not believe that my proposal herein is necessarily "realistic" (i.e. pragmatic). There are many interest groups that may oppose it for various reasons, based on their short-sighted desire to try to continue the status quo yet a while longer. Nevertheless, I feel that I must write and publish this paper. To say nothing in the face of the greatest financial calamity would go against everything I believe. *** It seems self-evident. The government can debase the currency and thereby be able to pay off its astronomical debt in cheaper dollars. But as I will explain below, things don't work that way. In order to use the debasement of paper currencies to repay the debt more easily, governments will need to issue and use the gold bond.(Wherever I refer to gold, I also mean silver. For the sake of brevity and readability I will only say gold in most cases. I give credit for the basic idea of using gold bonds to solve the debt problem to Professor Antal Fekete, as proposed in his paper: "Cut the Gordian Knot: Resurrect the Latin Monetary Union" (http://www.professorfekete.com/articles/AEFCutTheGordianKnot.pdf). My paper covers different ground than Fekete's, and my proposal is different as well. I encourage readers to read both papers. The paper currencies will not survive too much longer. Most governments now owe as much or more than the annual GDPs of their nations (typically far more, under GAAP accounting). But the total liabilities in the system are much larger. Even worse, in the formal and shadow banking system, derivative exposure is estimated to be more than 700 trillion dollars. Many are quick to insist that this is the "gross" exposure, and the "net" is much smaller as these positions are typically hedged. But the real exposure is close to the "gross" exposure in a crisis. While each party may be "hedged" by having a long leg and a balancing short leg, these will not "net out". This is because in times of stress the bid (but not the offer) is withdrawn. To close the long leg of an arbitrage, one must sell on the bid (which could be zero). To close the short leg, one must buy at the offer (which will still be high). When the bid-ask spread widens that way, it will be for good reason and it does not do to be an armchair philosopher and argue that it "should not" occur. Lots of things will occur that should not occur. For example, gold should not go into backwardation. This is another big (if not widely appreciated) piece of evidence that confidence in the ability of debtors to pay is waning. Gold and silver went into backwardation in 2008 and have been flitting in and out of backwardation since then. Backwardation develops when traders refuse to take a "risk free" profit. That is, the trade is free from all risks except the risk of default and losing one's metal in exchange for a defaulted futures contract. See my paper (http://keithweiner.posterous.com/61392399) for a full treatment of this topic. The root cause of our monetary disease has its origins in the creation of the Fed and other central banks prior to World War I, and in the insane treaty signed in 1944 at Bretton Woods in which many nations agreed for their central banks to use the US dollar as if it were gold, and this paved the way for President Nixon to pound in the final nail in the coffin. He repudiated the gold obligations of the US government in 1971, thereby plunging the whole world into the regime of irredeemable paper. The US dollar game is a check-kiting scheme. The Fed issues the dollar, which is its liability. The Fed buys the US Treasury bond, which is the asset to balance the liability. The only problem is that the bonds are payable only in the central bank's paper scrip! Meanwhile, per Bretton Woods, the rest of the world's central banks use the dollar as if it were gold. It is their reserve asset, and they pyramid credit in their local currencies on top of it. It is not a bug, but a feature, that debt in this system must grow exponentially. There is no ultimate extinguisher of debt. In my paper on Inflation (http://keithweiner.posterous.com/inflation-an-expansion-of-counterfeit-c...), I define inflation as an expansion of counterfeit credit. I define deflation as a forcible contraction of counterfeit credit, and the inevitable consequence of inflation. Well, we have had many decades of rampant expansion of counterfeit credit. Now we will have deflation, and the harder the central banks try to fight it by forcing yet more expansion of counterfeit credit, the worse the problem becomes. With leverage everywhere in the system, it would not take many defaults to wipe out every financial institution. And there will be many defaults. One default will beget another and once it really begins in earnest there will be no stopping the cascade. Another key problem is duration mismatch. Today, every bank and financial institution borrows short to lend long, many corporations borrow short to finance long-term projects, and every government is borrowing short to fund perpetual debts. Duration mismatch can cause runs on the banks and market crashes, because when depositors demand their money, banks must desperately sell any asset they can into a market that is suddenly "no bid". In two papers (http://keithweiner.posterous.com/fractional-reserve-is-not-the-problem and http://keithweiner.posterous.com/falling-interest-rates-and-duration-mis...), I cover duration mismatch in banks and corporations in more depth. Most banks and economists have supported a policy of falling interest rates since they began to fall in 1981. But falling interest rates destroy capital, as I explain in that last paper, linked above. As the rate of interest falls, the real burden of the debt, incurred at higher rates, increases. Related to this phenomenon is the fact that the average duration of bonds at every level has been falling for a long time (US Treasury duration began increasing post 2008, but I think this is an artifact of the Fed's purchases in their so-called "Quantitative Easing"). Declining duration is an inevitable consequence of the need to constantly "roll" debts. Debts are never repaid, the debtor merely pays the interest and rolls the principal when due. As the duration gets shorter and shorter, the noose gets tighter and tighter. If there is to be a real payback of debt, even in nominal terms, we need to buy more time. At the US Treasury level, average duration is about 5 years. I doubt that's long enough. And of course the motivation for building this broken system in the first place is the desire by nearly everyone to have a welfare state, without the corresponding crippling taxation. It has been long believed by most people a central bank is just the right kind of magic to let one have this cake and eat it too, without consequences. Well, the consequences are now becoming visible. See my papers (http://keithweiner.posterous.com/the-laffer-curve-and-austrian-economics and http://keithweiner.posterous.com/a-politically-incorrect-look-at-margina...) discussing what raising taxes will do, especially in the bust phase like we have now. In reality, stripped of the fancy nomenclature and the abstraction of a monetary system, the picture is as simple as it is bleak. Normally, people produce more than they consume. They save. A frontier farmer in the 19th century, for example, would dedicate some work to clearing a new field, or building a smokehouse, or putting a wall around a pasture so he could add to his herd. But for the past several decades, people have been tricked by distorted price signals (including bond prices, i.e. interest rates) into consuming more than they produce. In any case, it is not possible to save in an irredeemable paper currency. Depositing money in a bank will just result in more buying of government bonds. Capital accumulation has long since turned to capital decumulation. This would be bad enough, as capital is the leverage on human effort that allows us to have the present standard of living. We don't work any harder than early people did 10,000 years ago, and yet we are vastly more productive due to our accumulated capital. Now much of the capital is gone, and it cannot be brought back. It will soon be impossible to continue to paper over the losses. The purpose of this piece is not to propose how to save the dollar or the other paper currencies. They are past the point where saving them is possible. This paper is directed to avoiding the collapse of our civilization. If we stay on the present course, I think the outcome will look more like 472 AD than 1929. We must solve three problems to avoid that kind of collapse:
I propose a few simple steps first, and then a simple solution. All of this is designed to get gold to circulate once again as money. Today, we have gold "souvenir coins". They are readily available, and have been for many years, but they do not circulate. A gold standard is like a living organism. While having the right elements present and arranged in the right way is necessary, it is not sufficient. It must also be in constant motion. Gold, under the gold standard, was always flowing. Once the motion is stopped, restarting it is not easy. This applies to a corpse of a man as well as of a gold standard. The first steps are:
Each of these items removes one obstacle for gold to circulate as money, along side the paper currencies. The capital "gains" tax will do its worst damage precisely when people need gold the most. At that point, the nominal price of gold in the paper currencies will be rising very rapidly. Any sale of bullion will result in a tax of virtually the entire amount, as the cost basis from even a few weeks prior will be much lower than the current price. This amounts, in the US, to a 28% confiscation of gold. This tax will force people to keep gold underground and not bring it to market. It will contribute to the acceleration of permanent backwardation. It is important to realize that gold is not "going up". Paper is going down. There is no gain for the holder of gold; he has simply not lost wealth due to the debasement of paper. Current law forces creditors to accept paper as payment in full for all debts, and there are also laws that nullify gold clauses in contracts. Repeal them, and let creditors and borrowers negotiate something mutually agreeable. Finally, the bid-ask spread on gold bullion coins such as the US gold eagle or the South African krugerrand is too wide. If the mint provided seigniorage-free coinage service, then people would bring in gold bars and other forms of bullion until the bid-ask spread narrowed appropriately. One of the attributes that gives gold its "moneyness" is its tight spread (even today, it is 10 to 30 cents per $1600 ounce!) But currently, this tight spread only applies to large bullion bars traded by the bullion banks and other sophisticated traders. This spread must be available to the average person. As I said earlier, these steps are necessary. Gold certainly will not circulate under the current leftover regime from Roosevelt and Nixon. But it is not sufficient to address the debt problem. Accordingly, I propose a simple additional step. The government should sell gold bonds. By this, I do not mean gold "backed" paper bonds. I mean bonds denominated in ounces of gold, which pay their coupon in ounces of gold and pay the principal amount in ounces of gold. Below, I explain how this will solve the three problems I described above. Mechanically, it is straightforward. The government should set a rule that, to buy a gold bond, one does not bid dollars. One bids paper bonds! So to buy a 100-ounce gold bond, then one could bid for example $160,000 worth of paper bonds (assuming the price of gold is $1600 per ounce). The government retires the paper bond and in exchange replaces it with a newly-issued gold bond. The government should start with a small tender, to ensure a high bid to cover ratio. And a series of small auctions will give the market time to accept the idea. It will also allow the development of gold bond market makers. With gold bonds, it would be possible to sell long durations. With paper, there is no good reason to buy a 30-year bond (except to speculate on the next move by the central bank). The dollar is expected to fall considerably over a 30-year period. But with gold, there is no such debasement. The government could therefore exchange short-duration debt for long-duration debt. At first, the price of the gold bonds would likely be set as a straight conversion of the gold price, perhaps adjusted for differing durations. For example, a 100 ounce gold bond of 30 years duration might be bid at $160,000 worth of 30-year paper bond. But I think that the bid on gold bonds will rise far above "par", for several reasons I will discuss below. The nature of the dynamic will become clear to more and more people in due course. In the present regime, there is a common misconception that the yield on a bond is set by the market's expectation of how much consumer prices will rise (the crude proxy for the loss of value for the dollar). But this is not true. Unlike in a gold standard, in an irredeemable paper standard, people are disenfranchised. They have no say over the rate of interest. The dollar system is a closed loop, and if you sell a bond then you either hold cash in a bank, which means the bank will buy a bond. Or you buy another asset. In which case the seller of that asset holds cash in a bank or buys a bond. This is one of the reasons why the rate of interest has been falling for 30 years despite huge debasement. All dollars eventually go into the Treasury bond. The price of the paper bond today is set by a combination of central bank buying, and structural distortions in the system. But it is a self-referential price, in a game between the Treasury and the Fed. The price of the bond does not really come from the market. And this impacts every other bond in the universe, which all trade at varying spreads to the Treasury. An alternative to paper bonds would be very attractive to those who want to save and earn income for the long term, pension funds, annuities, etc. Not only will the price of gold continue to rise (i.e. the value of the paper currency will continue to fall towards zero), but also a premium for gold bonds would develop and grow. The quality asset will be recognized to be worth more, and at the least people would price in whatever rate of the price of gold they expect to occur over the duration of the bond. This dynamic—a rising price of gold, and a rising exchange value of gold bonds for paper bonds—will allow governments and other debtors to use the devaluation of paper as a means to repay their debts in nominal terms, but affordably in real terms. This is impossible under paper bonds! This is because the process of debasement is a process of the Treasury borrowing more money. Debt goes up to debase the dollar. This path leads not to repayment of the debt cheaply, but to exponentially growing debt until a total default. So we have solved problem number one. With a rising gold price, and a rising exchange rate of gold bonds for paper bonds, we have set up a dynamic whereby every paper obligation can be met in nominal terms. Of course, the value of that paper will be vastly lower than it is today. This is the only way that the immense amounts of debt outstanding can possibly be honored. This also solves problem number two. If every financial institution is repaid every nominal dollar it is owed, then they will remain solvent. To be sure, pension payments, bank accounts, corporate payroll, and annuities etc. will be of much lower real value. But there is a critical difference between smoothly losing value vs. abruptly losing everything, along with catastrophic failure of the financial system. I want to address what could be a misconception at this point. Does this work only for governments that have gold reserves in the vaults? No, this is not about gold reserves. While that may help accelerate a gold bond program, the essential is not gold stocks but gold flows. The government issuer of gold bonds must have a gold income (or a credible plan to develop one quickly). And this leads to problem number three. Gold does not circulate today. Who has a gold income? That is where we must look to begin the loop. There is one kind of participant today who has a gold income: the gold miner. Beset by environmentalist lawsuits, regulations, permits, impact studies, fees, labor law, confiscatory taxes, and other obstacles created by government, these companies still manage to extract gold out of the ground. The gold miners are the group to which we must turn to help solve the catch-22 of getting gold to circulate from the current state where it does not. I think there is a simple win-win proposition to offer them. In exchange for exemptions from the various taxes, regulations, environmentalism, etc. they have a choice to pay a tax in gold bullion. There are other kinds of entities to consider taxing, but the problem is that they all would need to buy gold in the open market in order to pay the tax. As the price begins to rise exponentially, this will be certain bankruptcy for anyone but a gold miner. And now, look at the progress we've made on the problem of getting gold to circulate. We have gold miners paying tax in gold to governments who are making bond coupon payments in gold to investors who now have a gold income. We can see how gold bond market makers will enter the scene, and earn a gold income to provide liquidity for bonds that are not "on the run". These bond market makers could pay a tax in gold also. And we have released other creditors from any restriction in lending and demanding repayment in gold. And anyone else in a position to sign a long-term agreement involving a stream of payments over a long period of time, such as landlords, can incorporate gold clauses in their contracts. And if the tenant has a gold income, perhaps from owning a gold bond, he can manage his cash flows and confidently sign such a lease. Note that the lender, unlike the employee, the restaurant, or most other economic actors, is in a position to demand gold. While everyone else would like to be paid in gold, they haven't got the pricing power to demand it. The lender can say: "if you want my capital, you must repay it in gold!" If enough gold bonds are issued soon enough, we may reverse the one-way flow of gold from the markets into private hiding, that is inexorably leading to inevitable permanent backwardation and the withdrawal of all gold from the system. One of the key points in my backwardation paper is that the value of the dollar collapses to zero not as a consequence of the quantity of dollars rising to infinity, but because of the desire of some dollar holders to get gold. If they cannot trade paper for gold, then they will trade paper for commodities without regard to price and trade those commodities for gold. This will cause the price of the commodities in dollar terms to rise to levels that make the dollar useless in trade (and collapse the price of commodities in gold terms). If we reverse the flow of gold out of the markets, we may be able to prevent this disaster from occurring. The dollar will then continue to lose value in a continuous (if accelerating) manner, as people migrate to gold. This is the best outcome that could possibly be hoped for. If it occurs along with a reduction in spending so that spending does not exceed (tax) revenues, we will avert Armageddon and be on the path to a proper and real recovery. To be clear, times will be hard and the average standard of living will decline precipitously. But this is infinitely preferable to total collapse. It is now up to farsighted leaders, especially in government, to take the firs
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| Posted: 26 Jan 2012 10:26 AM PST I feel that we must discuss the completely bizarre and somewhat unprecedented open interest numbers in silver.
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| HUI higher but showing signs of selling pressure coming back in Posted: 26 Jan 2012 10:22 AM PST [url]http://www.traderdannorcini.blogspot.com/[/url] [url]http://www.fortwealth.com/[/url] Take a look at the following chart and you will see what I am referring to. The mining shares gapped up today on the opening trying to catch up a bit with the overnight surge in gold and in silver but after that, most of them went nowhere. That is not a bullish sign for continuing their move higher. They did attract some dip buying later in the session but the shares are reflecting a lack of confidence that the rally in the metals is going to continue tomorrow. We will see whether or not they are prescient. ...
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| Republicans Demand Block Of US IMF Funding To Bail Out Europe Posted: 26 Jan 2012 09:53 AM PST In an odd coincidence, we were just updating the notional amount of FX swaps that the Fed has conducted with Europe in the past week, when we noticed that the GOP has finally made it an issue to fill in the gray area void of whether or not the US will be required to fund the IMF bailout of Europe. Tangentially, the Fed's USD swaps - an indicator of dollar-denominated last resort liquidity - just hit a 2012 high of $84.5 billion, increasing by $2 billion from the $82.5 billion in the prior week which makes us scratch our heads just how is it that Europe is "getting better" if instead of declining, usage of USD swaps is increasing confirming interbank liquidity is non-existence. This merely confirms that 4 weeks after peaking at a multi-year high of $85.4 billion in the last week of December, the European liquidity situation has once again started to deteriorate. It also means that the "self-reported" to the BBA 3M USD (but it's 'declining') is and continues to be about as worthless as any data out of the NAR. Finally, it disproves that statement under oath that Bernanke made to Congress that he would not bail out Europe. However, while Bernanke does not have any direct checks and balances-type supervision (the private Fed is merely beholden to its bank supervisors - just note the Class A directors on the FRBNY's Board) and does not have to concern himself too much with the nuances of perjury, the same can not be said about the US Secretary of the Treasury, for at most another 11 months, Tim Geithner, who doesn't have very powerful interests watching over him. It is Tim Geithner who would ultimately be the person responsible for permitting any IMF (of which America is the largest quota member, and thus, funder) capital transferm in which US taxpayer capital is used to rescue the lost cause known as Europe. Which is why we were delighted that after months of modest confusion on the topic, the Congressional Committee on Financial Services (including subcommittee chairman Ron Paul), have demanded that not only Geithner make his stance on a US-funded IMF bailout of Europe crystal clear, but that they are openly opposed to "American taxpayer dollars being used to bail out Europe...through additional contributions to the IMF." We are curious to see just how Geithner will weasel his way out of responding to this: perhaps the only logical stall tactic is to reply that he will be busy helping Mitt Romney in his tax "revisions" over the next several months. Incidentally, the House Committee on Financial Services may want to also ask the Fed Chairman how he reconciles his "no European bailout" statement with the chart below:
The press release issued by the "Republican Leaders." We are confused why Democrat Leaders are also not interest in the SecTres' response on the question of whether and how much US citizens will be bailing out the Italians and French with.
And the full letter to Geithner:
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| Posted: 26 Jan 2012 09:42 AM PST January 26, 2012 [LIST] [*]An "asset class" now government-guaranteed to lose at least 18% in a decade... [*]Dan Amoss identifies winners and losers now that the Fed is extending its zero-rate horizon for 18 more months [*]Unpacking the Indian-gold-for-Iranian-oil rumor... [*]How $100-a-barrel oil is good for American business: A compelling argument in support of Byron King's U.S. energy forecast... plus, a reader's thoughtful take: socialism, corruption, both or neither? [/LIST] For years, it was an unwritten rule. As of yesterday, it's official policy: The dollars in your wallet are destined to lose at least 18% of their purchasing power during the next 10 years. Lost in the noise of countless Federal Reserve announcements yesterday was a formal target of 2% annual inflation. Actually, it's worse than 18% over 10 years. For the Fed's favored measure of inflation is not the heavily gamed consumer price index — CPI — or the even-more-gamed "core" CPI that ...
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| Posted: 26 Jan 2012 09:14 AM PST The primary purpose for buying gold or silver is for preservation, protection and profit as well as survival from the destruction of paper money. It's just that simple.[COLOR=#3d85c6] Under the current financial circumstances, increases in the price of gold and silver will be significant and substantial over time. However, common sense dictates one should restrict new purchases to after retracements, not after $200 gold price advances. Strategic Play [/COLOR] [LIST] [*]Currently, we have just experienced a $200 advance in gold an a $7 increase in silver. Strategically, this is where one should be taking some money off the table, not initiating new bullion positions. [*]You will find many predictions elsewhere on how high gold or silver will ultimately go with some really outrageous numbers being offered. The projections may be true but they are still several years down the road. [/LIST] You will not find blue sky predictions here only clea...
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| The Surprise Rally In Gold and Silver Posted: 26 Jan 2012 09:08 AM PST At the end of 2011, Merkel and Sarkozy got together for an unusual emergency meeting. They pledged to come up with economic salvation. Immediately the equity markets mounted a year end "Halleluyah" rally. Bernanke followed Europe's ... Read More...
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| Why Endeavour Silver Corp. Is Now Withholding Gold & Silver Inventory From The Market 1/2 Posted: 26 Jan 2012 09:00 AM PST
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| Has Bernanke Become A Gold Bug's Best Friend? Posted: 26 Jan 2012 08:58 AM PST 26-Jan (ZeroHedge) — Below we present the indexed return of ES (or stocks) and of gold over the past 24 hours since the Bernanke announcement of virtually infinite ZIRP, and the latent threat of QE3 any time the Russell 2000 has a downtick. It is unnecessary to point out just when Bernanke made it all too clear that the Fed has nothing left up its sleeve, expect to directly compete with the ECB over "whose (balance sheet) is bigger," as it is quite obvious. What is not so obvious, is that for all intents and purposes, Bernanke may have unwillingly, become a gold bug's best friend, as gold (and implicitly silver) has benefited substantially more that general risk. Much more. So for the sake of all gold bugs out there, could the Fed perhaps add a few more FOMC statements and press conferences? At this rate gold should be at well over $2000 by the June 20 FOMC meeting. [source]
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| Posted: 26 Jan 2012 08:57 AM PST Gold Price Close Today : 1726.70 Change : 26.60 or 1.6% Silver Price Close Today : 3370.20 Change : 61.0 cents or 1.8% Gold Silver Ratio Today : 51.234 Change : -0.141 or -0.3% Silver Gold Ratio Today : 0.01952 Change : 0.000053 or 0.3% Platinum Price Close Today : 1609.00 Change : 31.50 or 2.0% Palladium Price Close Today : 690.45 Change : -2.55 or -0.4% S&P 500 : 1,318.45 Change : -7.60 or -0.6% Dow In GOLD$ : $152.47 Change : $ (2.63) or -1.7% Dow in GOLD oz : 7.376 Change : -0.127 or -1.7% Dow in SILVER oz : 377.88 Change : -7.62 or -2.0% Dow Industrial : 12,735.31 Change : -21.65 or -0.2% US Dollar Index : 79.40 Change : -0.177 or -0.2% Silver and GOLD PRICE added more credibility to their résumé today, pushing higher after upside upside breakouts. GOLD gained $26.60 (1.8%) to $1,726.70 while silver added 61c (1.8%) to close Comex at 3370.2, within easy spitting distance of our 3400c target. The GOLD PRICE pushed aside the $1,705 resistance like King Kong pushing down New York City streetlights, and sprang clean to next resistance around $1,725. What more can you ask? Gold has (1) broken out above its downtrend line from September, and (2) traded above the 200, 50, 20, and now 150 day moving averages. Momentum hardly gets more unanimous than that. Road for gold stretches out to $1,800. Someday will come a correction, not too long looking at the RSI, but not before gold makes more gains. The SILVER PRICE traded overnight barely below 3300c, at 3297.5c, then climbed like a stubborn Sherpa all day to a 3377.5c high. Comex close at 3370c came very close to the day's high. Here are the bounds: the SILVER PRICE must not close below 3300c, and must exceed 3400c to keep on rallying. With the world's largest central bank announcing that it will most surely keep on depreciating the dollar, what else would you expect silver to do? If you don't buy the silver breakout at 3400c, you'll never buy anything. It screams too loudly that it intends to move higher. All that said, remember humility and recall that markets turn on a dime. Closes below 3300c or $1,700 gainsays everything above. German chancellor Ferkel spoke at the Davos economic forum yesterday, coinciding with the FOMC's actions here. Coincidence? Or timed to manipulate fall of the dollar against the euro? No matter, she said nothing new. Crisis continues to be the elephant in the living room. An Israeli website reported yesterday that India has agreed to pay for Iranian oil with gold. Not sure whether this can be believed, but if it's true it is a flashing harbinger of change. Markets followed through today as expected from yesterday: gold and silver up, dollar down, stocks down. Maybe inflation isn't the universal economic panacea after all -- but what do I know? I'm no central banker, I'm just a natural born fool from Tennessee, not rating even 3 MLCs on the Scientific Stupidity Scale. STOCKS melted when they approached the Kryptonite of last spring's highs. Dow gave up 21.65 (0.17%) to close 12,735.31 while S&P500 lost 7.60 (0.57%) to close 1,318.45. Dow below 12,650 will accelerate the fall. More instructive is the last few days' behavior of the Dow in Gold Dollars (DiG$) and the DiSoz. From G$164.94 (7.969 oz) on 29 Dec. the DiG$ has fallen to G$152.47 (7.376 oz) today. From 450.5 oz the DiSoz has plunged to 377.88 oz today. Since the December highs showed upside breakouts on the chart, their retreat and failure now underlines one future: silver and gold will gain much more value against stocks, or, stocks will lose more value against metals. Same thing. US DOLLAR INDEX today fell 17.7 basis points (0.23%) to 79.402. This further fall below 79.50 merely confirms that the dollar has broken down from its uptrend. Low came at 79.07, and dollar may be forming a rounding bottom there, which would send it higher for a few days. Owch, it's below its 50 DMA (79.59). Lower closes will simply nail more nails into the dollar's coffin. Euro took a breather today, closing down 0.02% (nothing, basically) to 1.3104. Must remain above 1.3050 or foster suspicions that the ultimate bottom for the euro's long move is not yet behind us. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger The-MoneyChanger.com © 2012, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down. WARNING AND DISCLAIMER. Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures. NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps. NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced. NOR do I recommend buying gold and silver on margin or with debt. What DO I recommend? Physical gold and silver coins and bars in your own hands. One final warning: NEVER insert a 747 Jumbo Jet up your nose. 
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| Will Iran Kill the Petrodollar? Posted: 26 Jan 2012 08:56 AM PST By Marin Katusa, Casey Research The official line from the United States and the European Union is that Tehran must be punished for continuing its efforts to develop a nuclear weapon. The punishment: sanctions on Iran's oil exports, which are meant to isolate Iran and depress the value of its currency to such a point that the country crumbles. But that line doesn't make sense, and the sanctions will not achieve their goals. Iran is far from isolated and its friends – like India – will stand by the oil-producing nation until the US either backs down or acknowledges the real matter at hand. That matter is the American dollar and its role as the global reserve currency. The short version of the story is that a 1970s deal cemented the US dollar as the only currency to buy and sell crude oil, and from that monopoly on the all-important oil trade the US dollar slowly but surely became the reserve currency for global trades in most commodities and goods. Massive d...
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| How Ben Bernanke Rationalizes “Exceptionally Low” Interest Rates Posted: 26 Jan 2012 08:54 AM PST Anything happen in the markets yesterday? To tell the truth, we forgot to check. Let's have a look now, then… Dow up by 80-something points. A barrel of the world's currently-preferred energy sits pretty at $100, on the nose. Nothing much, in other words. Ooh…but here's something: "Gold extends post-Fed rally to 6-week high." MarketWatch has the story… Gold prices climbed Thursday to levels last seen in early December, extending a rally triggered as the Federal Reserve pledged to hold US interest rates near zero until the end of 2014. Gold for February delivery, having risen almost $25 yesterday on the news, now fetches $1,725 an ounce. And this, just when investors had begun to abandon the barbarous relic, to question its motives. But that was their mistake. Gold may go up. It may go down. But it has no motives. It is no man's liability. Instead, it simply holds a mirror up to its government-issued competition. It is, itself, just a dumb lump of metal. But even so…it frequently appears the brighter, smarter choice — in relative terms — to the buffoons in the mirror. Should we be surprised? So Mr. Bernanke is fiddling the levers again, promising to keep rates lower than a sea snake's belly until 2014. He might have just taken out an ad in the front page of the paper: "Fed to Savers: Go to Hell!" America's #1 central banker may well be highly intelligent…but that does not preclude him from also being a dunce. Probably, it depends on the subject at hand. Maybe he's a talented cowboy, for example. Or perhaps he is a whizz at the Times' crossword. Either way, we wish he'd dedicate more of his time to words and herds because, as a central banker, he's either a fool, a knave…or both. This is a man, let us not forget, who proclaimed…
And now, despite all evidence to the contrary, Mr. Bernanke thinks he can pull the economy out of the very mess into which he helped to steer it. He thinks he can deliver prosperity to a nation by punishing savers and inducing malinvestment — gross capital misallocation — on a scale so grand that die-hard proponents of Social (In)Security must be starting to blush. Bernanke's commitment to holding interest rates "exceptionally low" for an "extended period," reeks of exactly the kind of insanity required to double down on a bad bet, of repeating the same experiment and expecting a different result. Combined with his "relapse into QE3, Euro-style," which Eric Fry highlighted in yesterday's issue "Gentlemen, Start Your Printing Presses!", dollar-holders (and metal holders) ought to expect more of the same. Critics, amazingly enough, still wonder when the man will ever learn. Never, is our guess. For one thing, his incentive for denial is simply too great. What do we mean by that? Glad you asked… Imagine someone's whole existence, his entire life's work, is somehow built on a false grasp of reality, a radically skewed first principle. Imagine, for example, he is an internationally respected professor of alchemy. Or a world renowned proponent of the "stalk theory" of conception. Or…a central banker who believes he can know the impossible…the minds, the desires and the needs, of the millions who make up the market over which he imagines himself to lord. For a while, luck, coincidence and the arc of history appear to be on his side. As his life goes along, our hapless hero is awarded greater and greater accolades for his misbegotten theories and crackpot ideas. He is gifted the highest seat in the land. The adoration of friends and peers. TIME Magazine's "Man of the Year." Eventually, he comes to believe in the delusion he has created. It becomes his reason for being, his raison d'etre. Deeper and deeper he becomes convinced in his own ability to perform the impossible. One can see that our hero, sadly mistaken as he is, has every incentive to deny reality when (especially when) it is presented to him facts and all. Tell the alchemist he cannot alter the properties of led and his world, as he knows it, as it comforts him at night, begins to crumble. Likewise for our birdbrained OBGYN. So let the evidence against Mr. Bernanke's understanding of reality mount. As it will continue to do. We don't imagine this man, whose entire reputation, whose entire career, rests on a false reality, is going to suddenly about-face anytime soon. He has every incentive to deny the facts, to look the other way. Of course, it's easy to deny reality. Not so easy, as Ayn Rand once quipped, to deny the consequences of denying reality. They will come due soon enough, Fellow Reckoner…and then, as Bill Bonner likes to say, all the Fed's horses and all Obama's men won't be able to put Mr. Bernanke's economy back together…ever again. Joel Bowman How Ben Bernanke Rationalizes "Exceptionally Low" Interest Rates originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas.
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| Leeb - Fed Game Changer Sparks 2nd Leg of Gold & Silver Bulls Posted: 26 Jan 2012 08:53 AM PST Today is a new chapter that starts with the title 'Inflation is out of the bag.' So the question becomes where does that take gold?....
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| Eric Sprott: Mania. Manipulation. Meltdown. Posted: 26 Jan 2012 08:47 AM PST Eric Sprott to present at the 2012 SilverSeek.com Virtual Silver Investment Conference. Attendance to this online conference is FREE via online registration.
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| Financials Have Worst Day Of Year As Fed Is Faded Posted: 26 Jan 2012 08:38 AM PST We noted last night that heavy and large average trade size was going through after the cash market close in S&P futures and it seemed overnight we needed one more push to flush out some more chasers before today's less than euphoric macro prints (aside from CFNAI's market-centric index) stalled the Fed-induced excitement. Financials had their worst day of the year (worst performing sector 2 days in a row), down just under 1% as did the Tech and Energy sectors as Utilities were best once again. Volumes were up with ES at its 50-day average and NYSE volume second highest of the year as ES (the e-mini S&P 500 futures contract) slid 20 points or so from opening highs up near 1330. Equity and credit markets tracked on another closely all day (as did broad risk drivers) with a last-30-minutes ramp (once again on high average trade size) just for good measure taking ES back to Tuesday after-hours swing highs. The late swing up looked like a recovery from being modestly oversold relative to risk assets as TSYs, FX, and commodities all trod water as stocks pulled up 5-6 S&P pts into the close. TSYs all rallied on the day with 2s-10s all at week low yields and 30Y starting to catch up to the excitement at the end of the day (though 2s10s30s remains notably 'low' relative to ES currently). Gold and Silver continued to outperform (up around 3.5% on the week) and Copper held onto its gains while Oil dropped back below $100 after getting above $101 early in the day. The correlation of EURUSD and risk has re-emerged recently and post-Europe's close today, USD strengthened though EUR remained just above 1.31 as we closed.
With only their 6th down day of the year, financials dropped almost 1% (and Energy more). Interestingly Wells Fargo is -4.3% from the start of Bernanke's press conference yesterday (the worst performer of the majors). Morgan Stanley, Bank of America and Wells Fargo all sold off 3-3.5% from the early peak this morning and we note that CDS have widened also in the last two days. Volumes today were not dismal with ES at its 50 day average volume and NYSE volume its second highest (second only to OPEX).
Broadly speaking risk assets have remained highly correlated with ES the last day or two with ES a slight drag on them as today wore on. The small end of day rally in ES seemed to be a pullback to CONTEXT (green oval) as most risk assets were calm as we went out.
Commodities took their fiat-money lead from yesterday and pushed higher with Silver the biggest winner on the week so far (and from its lows yesterday obviously). Oil fell back close to its USD-equivalent shift before lifting a little into the close but failing to reach $100. In FX, EURUSD closed just over 1.31 as JPY strengthened relative to a broadly stronger USD - especially post Europe. Record low 5Y Treasury yields and 7Y outperforming (auction) on the week (-12bps) saw the curve steepen but even 30Y started to crack lower in yield into the close, pushing it to being down in yield now for the week (by only 1bps). In secondary corporate bonds, financials were net sold (something we haven't seen absent decent issuance) for a while (and CDS were also wider) as it appeared a focus on buying in the belly and away from short-dated and long-dated corporate paper was evident from the buy-side (reflective of the moves in TSYs). IG and HY traded quite tightly together in CDS land but the decompression trade appeared to show its head a little as IG closed very modestly tighter while HY was down in price (only the second time in the last nine trading days!). Charts: Bloomberg and Capital Context
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| Silver Is The Indispensable Metal Posted: 26 Jan 2012 08:22 AM PST
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| Why Silver Miners are Hoarding Silver Posted: 26 Jan 2012 08:18 AM PST Think about it - if you owned nearly a million ounces of silver and buyers would offer only $28 per ounce, would you sell?
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| Posted: 26 Jan 2012 08:13 AM PST Update: literally seconds after this article was posted, we receive news that the IMF will seek Saudi contribution to the European bailout fund. There you have it - you enjoy that implicit US protection Saudi emirs? It is about to cost you. While it is best to pray that NASA will find some very rich and not so intelligent life on Mars so it can bail out the world as it sinks deeper and deeper into a untenable debt hole (which somehow can be "filled" only by issuing more debt at least according to tenured economists at ivy league institutions), a strategy of planning for a realistic outcome may not be a bad idea. The question then is who in the world has some/any spare leverage capacity to incur even more debt and use the proceeds to fund a Eurozone-American-Chinese collapse. Enter the Economist's "wiggle-room index." The publication, best known for recently introducing the "shoe thrower index" (remember the Arab Spring and how Fed induced runaway inflation generated a "democratic" revolution across MENA?) has compiled a list of those developing world countries which still have capacity to provide credible global bailout capital (in fiat form of course - after all that is the only thing that the Ponzi understands) or as the Economist says, the "emerging economies that have the most monetary and fiscal firepower." So if you are on this list (ahem China, Indonesia and Saudi Arabia) - our condolences - you are about to be dragged into the epic slow-motion ongoing collapse of the developed world, kicking and screaming, with some 44 caliber persuasion if needed, but you will be there, before it all falls apart. The time to repay all favors to Uncle Sam is The interactive chart is as follows: the Economist's commentary:
For those who don't want to go all the way to the last step, and are more curious who will pick up just the Euro tab, between the IMF and the Eurozone, here is an analysis from Reuters showing just that. Of note is that should Germany digs its heels into the mud and say "nichts mehr", then it will be up to the IMF to rescue Europe. To the tune of 61%. Which means you, America.
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| Gold Daily and Silver Weekly Charts - Consolidation (With a Slight Return) Posted: 26 Jan 2012 08:10 AM PST |
| Tail Events, Isolation, New Normal Posted: 26 Jan 2012 08:00 AM PST The year 2012 has started out in strange ways. While celestial forces augur for rare tail events, the assurance of man-made events that stretch far into the extreme tail of probability are not only very likely but will be of a type to reflect the change in the global balance of financial power. The Paradigm Shift mentioned over the course of the last two to three years is at work, having moved into a higher gear. The gold is moving from the West to the East, along with the power. We will not see the process reverse in our lifetime.
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After the near-collapse of the financial system in 2008, a growing number of people have come to realize that our monetary disease is terminal. It is that group to whom I address this paper. I sincerely hope that this group includes leaders in business, finance, and government.
Everywhere you turn these days, someone is proclaiming that the economy is improving. Barack Obama is endlessly touting the "improvement" in the economy, the mainstream media is constantly talking about "the economic recovery" and an increasing number of Americans seem to be buying into this line of thinking. A new NBC/Wall Street Journal poll found that 
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